2025 One Big Beautiful Bill Act - Changes to Child and Dependent Care Tax Credit

The One Big Beautiful Bill Act, enacted on July 4, 2025 as Public Law 119-21, introduced a wide range of changes that will impact tax returns for the 2025 tax year and beyond.

While the credit for child and dependent care expenses remains nonrefundable and is calculated using the smaller of (a) qualifying expenses, (b) the primary taxpayer's earned income, or (c) the spouse's earned income, the OBBB made several significant changes to the phaseout schedule starting in tax year 2026:

• Larger decimal amounts are used to calculate the credit.
• Increased the AGI ranges.
• The phaseout schedule itself is divided between MFJ filers and all other filers.

Additional Information:

IRS: Instructions for Form 2441

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